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|The international consulting firm Deloitte has released the most recent installment of its Global Manufacturing Supply Chain Benchmarking research program, Some of the key findings from "Mastering the Innovation Paradox," based on research gathered from nearly 650 leading manufacturers worldwide in the aerospace & defense, automotive, consumer products, chemicals, general manufacturing, pharmaceuticals and high technology and telecommunications equipment sectors, are:
- Manufacturers state that launching new products and services are the primary driver of revenue growth, yet they also view supporting product innovation as one of the least important priorities.
- 50 to 70 percent of all new product introductions fail.
- New product revenue will jump to 35 percent in 2006, up from just 21 percent in 1998.
- By 2010, products representing more than 70 percent of today's sales will be obsolete due to changing customer demands and competitive offerings.
"Our research clearly shows that a significant profit barrier exists in the manufacturing industry and this barrier is directly related to the failure of most new products and services, as well as the lack of priority placed on successful innovation practices," says Doug Engel, Deloitte's National Manufacturing Industry Director.
The findings conclude that many manufacturers are unable to profitably bring new products and services to market. This paradox is the result of several key reasons, including:
- insufficient information on customer needs.
- supplier capabilities.
- a reluctance to allocate additional spending on R&D.
- a disjointed approach to innovation across product, customer and supply chain operations.
The small percentage of manufacturers that have achieved success excel in three areas:
- Managing Innovation: The ability to identify both 'sustaining' and 'disruptive' innovations, the latter of which are often ignored by companies trying to protect their current products. Best practices also include superior generation of ideas from outside the organization; development of business cases upon which enlightened investment decisions can be made; an understanding of the gap between the performance of current satisfiers of customer demands and proposed new offerings; and the ability to decide upon the best organizational model for putting the innovation into action.
- Exploiting Innovation: The ability to turn ideas into growth and profit. Most companies focus only on the front end of the new product lifecycle instead of focusing on the entire lifecycle.
- Building Innovation Capabilities: In addition to managing and exploiting innovation, four key capabilities drive success and can enable manufacturers to maximize profits throughout the entire product lifecycle:
1. Extensive collaboration with customers and suppliers, and development of better processes to increase flexibility and lower cost.
2. Superior visibility both upstream and downstream in the value chain.
3. Flexibility with product development, manufacturing and other operations.
4. Use of advanced technologies for product lifecycle management (PLM), customer relationship management (CRM), and advanced planning and scheduling (APS).